07/08/2025 - 07:21 UTCThe US Dollar Index (USDX) is trading lower, around 97.80 early on Thursday, after dropping -0.56% on Wednesday. This decline is largely due to disappointing U.S. economic data, which has heightened market expectations for a Federal Reserve rate cut. The pressure on the dollar began with last week's soft jobs report and was compounded by Tuesday's data. The Institute for Supply Management (ISM) Services PMI for July fell to 50.1, missing the forecast of 51.5. As traders now price in a higher chance of a September rate cut, they are closely watching upcoming speeches from Fed policymakers for further clues on the interest rate outlook.
The market is also digesting news from President Donald Trump, who announced he will soon name a nominee for the next Fed Chair. He has ruled out Treasury Secretary Scott Bessent but is considering other candidates. At the same time, Trump’s latest trade deadline looms on Friday, with new high tariffs set to take effect unless last-minute deals are reached. This could stir fresh market volatility.
The Bank of England (BoE) is widely expected to cut its benchmark interest rate to 4.0% from the current 4.25% on Thursday. This decision comes as policymakers weigh an unexpected surge in inflation against continued economic contraction.The GBP/USD pair is currently battling to extend gains beyond 1.3300, having risen by 0.86% on a weekly basis. Meanwhile, the UK 100 index is up by 0.43%, approaching all-time highs reached last week. Markets anticipate seven of the nine Monetary Policy Committee (MPC) members will vote for a rate cut, a significant increase from the three members who voted for a cut in June. The decision will come with the meeting minutes and the quarterly Monetary Policy Report, providing key insights into the bank's economic analysis. Governor Andrew Bailey will also hold a press conference to explain the decision and hint at future policy.
The UK economy is showing a mixed picture, with a slowdown in growth as seen by contracting GDP in both April and May. Simultaneously, inflation is on the rise, reaching its highest level in over a year. The core CPI also increased, leaving the Bank of England (BoE) with a key decision to make: prioritize addressing stalled growth or persistent inflation. Despite this conflicting data, Governor Andrew Bailey has previously indicated that he believes the direction for interest rates is "downward."
The economic data presents a mixed picture. The UK economy is slowing, with Gross Domestic Product (GDP) contracting in both April and May. However, inflation is rising, with the Consumer Price Index (CPI) hitting 3.6% in June, its highest level in over a year. The core CPI also increased to 3.7%. This leaves the BoE with a crucial question: which is the bigger threat—stalling growth or persistent inflation? Despite the conflicting data, Governor Andrew Bailey has previously stated his belief that the path for interest rates is "downward."
Asian stock markets were largely positive on Thursday, with most indices tracking overnight gains on Wall Street despite fresh tariff threats from President Donald Trump. Chinese markets showed strong momentum, with the China SSE index rising 2.15% and the China SZSE index up by 1.46%. The Hong Kong 50 index also gained 2.86
Wall Street's main equity indices ended higher on Wednesday, reversing the previous session's losses. The rally was fueled by a tech surge, particularly from Apple's announcement of a new $100 billion investment in U.S. manufacturing. Apple Inc jumped over 5% on its planned $100 billion investment in U.S. manufacturing. Meanwhile, burger giant McDonald’s reported better-than-expected global sales for the second quarter. Walt Disney saw its stock fall after its conventional TV networks and sports programming revenue disappointed, even though its theme parks and streaming services performed well.
On the tech front, Advanced Micro Devices stock fell after the chipmaker reported underwhelming quarterly revenue in its data center business. Snap shares plummeted after a weak quarter, and Rivian Automotive also struggled due to a worse-than-expected loss. In contrast, Spotify Technology stock soared after forecasting strong third-quarter revenue.
The EUR/USD jumped more than 0.50% on Wednesday, ending the session to 1.1663 after rebounding from a session low of 1.1564. The surge was driven by broad-based weakness in the US Dollar, as market participants increasingly priced in potential Federal Reserve rate cuts amid growing economic uncertainty and renewed political influence concerns.
US President Donald Trump announced plans to nominate a replacement for outgoing Fed Governor Adriana Kugler, who is set to step down on August 8. The move has reignited debates over the Federal Reserve’s independence, adding a layer of political tension to an already uncertain monetary policy outlook.
Although the US economic calendar was quiet on Wednesday, several Federal Reserve officials made noteworthy comments. Boston Fed President Susan Collins emphasized persistent uncertainty in the economic outlook, advocating a cautious, data-dependent approach. Similarly, Fed Governor Lisa Cook flagged July’s disappointing jobs report, warning that significant revisions often signal inflection points in the economy. Their remarks suggest the Fed is likely to maintain its current policy stance until more definitive signs of a slowdown emerge.
Meanwhile, economic data from the Eurozone painted a mixed picture. Germany’s Factory Orders declined in June, pointing to ongoing industrial weakness, while retail sales across the bloc posted year-on-year improvement, offering a modest upside surprise.
Looking ahead, traders will focus on upcoming US Initial Jobless Claims data, which could offer further clues on labor market strength. In Europe, Germany’s Industrial Production figures and Trade Balance will be closely watched to assess the health of the EU’s largest economy.
Gold prices edged lower on Wednesday as traders locked in profits following a strong rally that pushed the metal to near two-week highs in the previous session. Meanwhile, market attention turned to U.S. President Donald Trump’s forthcoming nominations to the Federal Reserve Board.
Gold had rallied for three straight sessions after Friday’s weaker-than-expected U.S. employment data fueled expectations of monetary easing. According to the CME FedWatch Tool, the probability of a rate cut in September has surged to over 93%, up sharply from 63% earlier. As a non-yielding asset, gold tends to benefit from lower interest rates and periods of economic uncertainty.
Adding to the market's focus, President Trump announced Tuesday that he would nominate a new Federal Reserve Board member by the end of the week.
On the geopolitical front, U.S. envoy Steve Witkoff held what the Kremlin described as "useful and constructive" talks with Russian President Vladimir Putin, just two days before a deadline set by President Trump for Russia to reach a peace agreement in Ukraine or face new sanctions.
Oil prices fell for the fifth consecutive session on Wednesday, hitting their lowest levels in nearly two months, as comments from U.S. President Donald Trump regarding progress in negotiations with Moscow injected fresh uncertainty into the market over potential sanctions on Russia.
The decline came after President Trump said that U.S. special envoy Steve Witkoff had made “great progress” in recent discussions with Russian President Vladimir Putin. While the White House continues preparations for imposing secondary sanctions on Friday, Trump’s remarks suggested a potential easing of tensions, which could pave the way for more Russian oil exports. As the world’s second-largest crude producer, Russia’s export capabilities play a significant role in global oil supply. Easing sanctions would likely increase Russian oil flows, adding pressure to prices already grappling with supply-side developments.
Earlier in the session, oil prices briefly climbed after Trump signed an executive order imposing a 25% tariff on goods from India, citing the country's indirect imports of Russian oil. The tariff, set to take effect 21 days after August 7, adds another layer of geopolitical tension to the market. Adding to the bearish sentiment is the expectation of an upcoming OPEC+ supply increase, which has also weighed on prices in recent sessions.
In a related geopolitical development, Indian Prime Minister Narendra Modi is set to visit China for the first time in over seven years, signaling potential diplomatic shifts in the region as India’s tensions with the U.S. escalate.
Despite the downbeat market sentiment, oil prices found some support earlier in the day from stronger-than-expected inventory data. The U.S. Energy Information Administration (EIA) reported a drawdown of 3 million barrels in crude inventories for the week ending August 1—well above analyst expectations for a 0.6 million barrel decline.
U.S. equities rebounded sharply on Wednesday, led by a surge in tech stocks and buoyed by stronger-than-expected corporate earnings. The rebound followed Tuesday’s pullback, which was driven by renewed concerns over U.S. economic health after last Friday’s weaker-than-expected jobs report.
Tech stocks powered higher, with Apple Inc jumping over 5% after reports emerged that the company plans to invest an additional $100 billion into U.S. manufacturing. This move would bring its total domestic investment commitment to $600 billion. Apple’s surge set the tone for a broader rally in the technology sector, which has been bolstered by upbeat corporate earnings across the board.
More than 80% of S&P 500 companies that have reported so far have beaten earnings expectations, helping to offset concerns over broader macroeconomic weakness. McDonald’s Corp. reported stronger-than-expected global sales for the second quarter, thanks to successful value meal promotions targeting cost-conscious consumers. Walt Disney Co. posted mixed results, with TV and sports programming revenue falling short of forecasts, while its theme parks and streaming divisions performed strongly.
Chipmaker Advanced Micro Devices saw its stock fall after reporting disappointing revenue in its critical data center segment, a sharp contrast to the recent momentum enjoyed by rival Nvidia.
Despite the strength in corporate earnings, economic concerns continued to loom large. The Institute for Supply Management’s (ISM) non-manufacturing PMI fell unexpectedly to 50.1 in July, down from 50.8 in June, indicating stagnating growth in the services sector—which accounts for nearly 80% of the U.S. economy.
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